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After a lull of more than two years, office space absorption has started picking up in the country and developers hope commercial realty demand too will bounce back in 2015 if the current trend continues.

The office sector witnessed a lot of activity in 2014 with net absorption of 9.3 million sq ft in Q3, 1.58 times more than the year-ago period. This performance was bettered only once before, in 2011. Compared with the September quarter last year, the same period in 2014 showed a 58 per cent growth in office space demand, reports said.

Ahmedabad, Bangalore, Hyderabad, Mumbai and Delhi were the best performing markets. As the economy emerged out of an all-time low and business confidence grew, office markets rebounded. Companies have started expanding and new leases now constitute 75 per cent of all lease deals. Demand has been driven by all sectors, but IT/ITeS was the main contributor, as the e-commerce sector expanded.

Experts said the trend will continue and net absorption will outstrip new supply from 2016. Lease rentals for commercial properties are likely to go up with demand revival.

Rajeev Talwar, executive director of DLF, told Financial Chronicle: “Commercial real estate demand is picking up with companies expanding businesses. Sectors like auto and cement are showing signs of improvement and once they see full-fle­dged revival, demand will go up further.”

The IT industry, which had seen difficult times due to a drop in clients’ IT spend, is seeing revival in business as demand rebounds from traditional markets – the US and Europe – and firms see large potential in the domestic industry. IT firms are expanding operations, triggering a ripple effect in the realty sector.

“Office space absorption has begun picking up in primary cities like Mumbai, Delhi, Pune and Bangalore. Multinationals are once again exploring entry and expansion in India, and large domestic companies are once more on a hiring spree. There is positive sentiment in the market,” said Anuj Puri, chairman and country head of JLL India.

The rupee-dollar equation, which represents the monetary advantage that foreign firms perceive in entering and operating in India, plays an important role in commercial space absorption, which also manifests itself in the housing market.

US multinational firms dominate India’s grade-A office leasing market, accounting for 45 per cent of leased space. These firms, along with European MNCs that account for 15 per cent of office space leasing, are again bullish about India. Indian companies, accounting for 30 per cent of market share, are slightly behind in executing growth plans.

IT major Cognizant is investing over Rs 500 crore to expand its facility at Gachibowli, Hyderabad. It started operations at this unit in 2002 with 180 professionals and now has about 18,000 people. The company plans to add 1.5 million sq ft, more than six times the existing facility. Cognizant will create infrastructure to house around 8,000 professionals.

Tech Mahindra has added a new IT block in Bhubaneshwar, doubling capacity from 500 to 1,111 seats. HCL Technologies is adding 2.8 million sq ft, including 2.53 million sq ft in NCR and the remaining in Bangalore, to its existing built-up area of 1 crore sq ft. It will add 14,411 seats – 12,676 in NCR and 1,735 at Bangalore — in times to come.

Smaller companies are also increasing their footprints. Pegasystems and Cigniti Technologies have taken up 3,00,000 sq ft and 50,000 sq ft facilities, respectively, in Hyderabad. A bigger campus was needed to accommodate the increasing global demand, said Suman Reddy, managing director of Pegasystems India.

Vinod Rohira, director of K Raheja Corp, said, “Commercial demand is driven by IT/ITeS and other businesses. In Ind­ia, up to 70-80 per cent of demand comes from IT/ITeS. With the e-comme­rce boom and other IT-related activities picking up, demand from the sector has revived. For other businesses, there are initial signs of improvement. If the trend continues for 6 months, we can see a full-fledged revival in commercial realty.”

Mumbai and Ahmedabad are also witnessing rise in demand. Earlier, many developers in Mumbai had converted commercial properties into residential or mixed-use properties as demand fell drastically due to a slowdown in the economy.

Boman R Irani, CMD of Rustomjee Group, said, “In the last one year, demand for office space had declined and developers were focusing on residential projects. As a result, the addition of new space declined. Now demand is going up with the improvement in the economy, as many business houses are looking to expand.”

Irani said the existing inventory is expected to get absorbed quickly, as developers have gone slow in new capacity addition. Lease rentals are expected to rise once demand revives.

Cushman & Wakefield in a report said among the top performing cities, Bangalore witnessed 92 per cent total net absorption in 2014, Delhi-NCR accounted for about 45 per cent and Ahmedabad saw a two-fold jump. Hyderabad saw a 84 per cent rise from a year ago, recording net absorption of 3.8 msf. Overall vacancy levels too declined to 18.4 per cent, it said.

Lease rentals too are expected to go up in the New Year. Only 22 million sqft of office space will be ready at right locations against the demand forecast of 30 million sqft. “There is also the possibility of saturation, forcing organisations to open satellite offices,” said Ashvin Vellody, management consulting at KPMG in India.

Mumbai climbs city-wise rankings as per a recent report by ULI and PwC

Sentiment around Indian real estate among both domestic and international investors has improved in recent times, following the election of a new government and also on account of an upturn in consumer demand, says the Emerging Trends in Real Estate® Asia Pacific 2015 report, published jointly by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).

Consequently, the rankings of Mumbai, Delhi and Bangalore have improved significantly from that of last year in the list of investment destinations. This year, Mumbai occupies the 11th position (it was ranked 23rd in 2013), while Delhi and Bangalore have taken up the 14th and 17th positions respectively. In 2013, Delhi was placed at 21st position while Bangalore was at 20th position.

The positive sentiment can be gauged by the fact that global real estate funds focused on India are seeking to raise $6 billion in new capital, on top of $1.6 billion raised in the first seven months of 2014; most of this is aimed at residential projects. In addition, there has been a significant rise in interest from large sovereign and foreign institutional players over the course of 2014, the report highlighted.

Gautam Mehra, Partner, PwC India, said, Mumbai has climbed the most in ranking among the cities in the survey, from 23rd position to 11th, with the other Indian cities, New Delhi and Bangalore, also seeing a jump in the ranking, driven by the election of the new government.

There is certainly a positive vibe complemented by the expectation of an improved economy and a more transparent environment, keeping interest levels up among investors. In this backdrop, the position of excess liquidity across various jurisdictions which is pointed towards real estate augurs well for Indian markets.

Additionally, the expected developments around creation of a series of “smart cities” focused on large scale manufacturing, and the roll out of REITs, if implemented well, are expected to further add to the momentum. The outcome of large volumes in e-commerce is likely to translate in demand for large scale logistics and warehousing space, he added.

Overall in Asia, real estate markets are expected to remain resilient despite weakening economic fundamentals throughout 2015, as capital continues to flow into the industry from a variety of investment sources, both domestic and international. Japan remains a favored country for real estate activity.

Mumbai’s real estate didn’t undergo major policy changes or reforms but it continued to be India’s most desirable place for millionaires, housing over 2000 of the richest people on earth.

In fact, Magicbricks data also indicated the same as it continued to be the most preferred city for outright purchase and rent across India throughout the year. At the same time, affordable property options in the city moved towards the peripheries, causing disappointment among the middle-class segment.

However, the good news is that positive sentiments hovered around Mumbai realty, anticipating reforms from the BJP government. What else impacted the realty here? Here’s a roundup of the year that was:

Land unlocked

From the coastal zone to private forest land, Mumbai city saw new land being unlocked for real estate development, majorly for residential projects. The recently revoked ban on Powai’s ‘No development zone’ for building convention centres and entertainment hubs is expected to relieve pressure on existing resources in Bandra West. Similarly, coastal regulation zone in Mahim will be bringing new sea facing homes to the city. Nahur, Mulund and Bhandup are other areas which had private forest land that got released for construction.

What to expect: The soon to be announced Bombay Port Trust land is also expected to be freed for development. However, it is still not decided whether it will be utilised for residential or commercial purposes.

Infrastructural improvements

The Santa Cruz-Chembur Link Road (SCLR), Versova-Andheri-Ghatkopar Metro, Eastern Freeway and Wadala-Chembur Monorail are four key infrastructural developments which improved the travelling experience of Mumbaikars. This resulted in increased pricing in the Eastern Suburbs. Moving towards South Mumbai became easy through the Eastern Freeway while SCLR eased the traveling experience towards the Bandra-Kurla Complex. Similarly, the Versova-Andheri-Ghatkopar Metro connected the Western Suburbs to the eastern and the Wadala-Chembur Monorail brought life back to central localities of Mumbai.

What to expect: Expansion of the Monorail Phase II which will connect Jacob Circle to Chembur, once again changing the dynamics of the Central Line regions.

Jawaharlal Nehru Port Trust (JNPT) SEZ

As soon as PM Narendra Modi laid the foundation stone of the Rs 4,000 crore SEZ in Navi Mumbai, the realty here pinned hopes on jobs to be created. Lack of employment in the region is holding back the housing demand here, believes the real estate fraternity. Interestingly, localities such as Ulwe and Dronagiri have ample land banks available for housing, but hardly any demand. With more opportunities and availability of high paying jobs, the area is expected to attract buyers from an entirely different segment, which till now limited were limited to premium localities of Mumbai.What to expect: CIDCO is expected to allot more land for Special Economic Zones (SEZs) and residential real estate development in Navi Mumbai. Infrastructure development in Ulwe is expected to boost the realty here, which is currently undergoing a down phase.

Peripheral areas

As properties in Mumbai and the Western Suburbs have reached ‘unaffordable’ levels, affordability moved to the fringe areas beyond Thane, Navi Mumbai and even to Palghar. The newly declared district of Palghar saw project launches from prominent realty brands in budgets as low as Rs 9 lakh. Similarly, this year, Badlapur remained popular for property purchase in a budget range of below Rs 20 lakh. Panvel also saw launches of villa projects within Rs 40 lakh.

What to expect: Better transportation coupled with quality construction in fringe locations is expected to push the mid-segment buyers here. New infrastructure is the need of the hour.

Despite the increasing prices commercial properties in Mumbai continue to remain in the upswing mode.

It is believed by the real estate companies and developers that over a period of time one can get returns as high as 15 to 20%, if invested in the commercial property in Mumbai.

Mumbai is known as the financial capital of India, and as the phrase suggests, it puts Mumbai at the forefront of the economic landscape in India as well as in Asia. Mumbai’s economic market is driven by companies from the financial services, banking, IT, ITES, Insurance and other service sectors. Over the past few years, the investors and corporate who are seriously looking at investing in India are zeroing on Mumbai as their investment hub as this city hold the India’s “numero uno” position and it has consistently proved to be stable during the moments of economic uncertainty.

Despite the increasing prices commercial properties in Mumbai continue to remain in the upswing mode. It is believed by the real estate companies and developers that over a period of time one can get returns as high as 15 to 20%, if invested in the commercial property in Mumbai. The demand is not only for the commercial property for sale but also for the commercial office spaces for rental and leases, which is also witnessing a steep rise, and thus causing a hike of 25% in the commercial prices in the past few months.

The commercial real estate sector is classified based on their unique characteristics:

Classification

Localities

Central
Business District (CBD)

Nariman Point, Cuffe Parade, Fort, Churchgate

Extended Central
Business District

Lower Parel, Mahalaxmi, Prabhadevi, Worli

Emerging
Central Business District

Bandra Kurla Complex (BKC), Kalina

Secondary
Business District (SBD)

Andheri, Powai, Kurla, Malad, Borivali

Peripheral Business District (PBD)

Airoli, Thane, Vashi

Nariman Point: Nariman Point is Mumbai's as well as country’s first planned central business district. The area is situated on land that is reclaimed from the sea. It is said that this place have the highest commercial rental space in the world. Places like Cuffe Parade and Churchgate are adjacent to this locality and thus are part of the CBD. Being in Central Business Unit, Nariman Point has the advantage of proximity to the Western Line, Central Line and the Harbour Line Terminus Stations.

It is largely considered as the 'Manhattan' of Mumbai and it boasts of an impressive skyline and high-priced residential condos. It is the main financial district of Mumbai and houses most of the financial services and brokerage companies—both Indian and international. Some of the companies located here are:

• Accenture Management Consulting

• The Royal Bank of Scotland

• Boston Consulting Group

• State Bank of India

• HSBC

• Consulates of Oman

• JP Morgan

• Mckinsey and Company

• India Bulls

• Tata Consultancy Services

Worli: Once a traditional textile mill location is now one of the prime commercial real estate destinations in the country. The location has shown a great deal of flexibility, even when other micro markets in Mumbai were struggling under pressure.

This locality has not only managed to retain its premium position in the extended central business district but also has maintained steady price all these years. The uniqueness of Worli is its proximity to CBD (Nariman Point) on one side and Bandra-Kurla Complex (BKC) and the airport on the other end. The newly built sea link has further enhanced its creditability. Factors like grade a buildings, green buildings, ample car parking and modern technology being used for construction are contributing towards growth of Worli. Some of the offices located in Worli are:

• GSK Pharma

• TATA

• Novartis

• HDFC Bank

• Yes Bank

• Siemens

Bandra-Kurla Complex: The Bandra Kurla Complex is a planned commercial complex and one of the most strategic commercial real estate in Mumbai. According to MMRDA, the complex is the first of a series of "growth centres" created to "arrest further concentration" of offices and commercial activities in South Mumbai. It is expected to decongest southern Mumbai and seed new areas of planned commercial real estate in the metropolitan region”. Bandra-Kurla Complex houses number of commercial buildings that include:

• NABARD Head office

• Asian Heart Institute

• Dow Chemicals

• ICICI Bank

• Citibank

• Bharat Diamond Bourse

• Dhirubhai Ambani International School

• American School of Bombay

• IDBI Bank

• SEBI

It also comprises of Mumbai Cricket Association's cricket ground and the United States Mumbai Consulate. There are approximately 4 lakhs people working in various offices in Bandra-Kurla Complex. Good facilities like abundant parking, wide roads, excellent power supply, etc been properly taken care of in this commercial hot-spot. The newly built Bandra-Worli Sea Link has reduced the traffic flow to a great extent from North to South Mumbai and reduced the travel time between Bandra and Worli. Also, the 1.3 km long Bandra-Kurla skywalk has connected the suburban regions of Bandra and Kurla.

Andheri East: Andheri East has emerged as one of the popular commercial hub after the traditional commercial hubs like Bandra Kurla Complex (BKC) and Nariman Point. This locality is gaining popularity due to the good transport connectivity. The markets of Andheri East are benefitted by the Jogeshwari-Vikhroli Link Road (JVRL), Andheri Kurla Link Road, and the Versova-Andheri-Ghatkopar metro link. Also, being close to the Airport, this stretch has been a hub for manufacturing and professional services and logistics. The locality is a blend of industrial and commercial establishments ranging from IT and ITES, manufacturing, financial services, logistics, pharmacy, jewellery, retail etc. Some of the companies housed here are:

• Patni Computers

• Syntel

• Mastek Limited

• Jet Airways India Limited

• Abbott Healthcare Private Limited

The metro rail project between Versova-Ghatkopar will further enhance connectivity between eastern and western suburb. The new commercial projects in Andheri East are taken care by Hiranandani, Kalpataru, Kohinoor, Rustamjee and Phoenix among others. This business hub is also sharing space with hospitality sector; some of the hotels in Andheri East are Hyatt, Sheraton and The Leela Palace.

Airoli: Airoli is the emerging as the new commercial space requirement in Mumbai. Away from the city traffic and surrounded by green region this area is a sought-out commercial destination among corporates. One can even find availability of land for new development at affordable prices. Airoli is rapidly growing as one of the busiest business district. Airoli commercial estate is consistently meeting the international standards, and is fully equipped with all the facilities and amenities. To add to it, it has excellent connectivity through Eastern Express Highway in the south and Thane-Belapur Road in the north linking Airoli to Mulund and rest of Mumbai that has invited lot of developers and corporates for commercial activities.

Some of the well known properties in Airoli are:

• Airoli Knowledge Park

• Patni Knowledge Park

• Mindspace Airoli

The commercial real estate scenario in Mumbai and its suburbs supports new buyers and investors. Over the next two years, the rentals and capital values in Mumbai’s CBD are likely to decrease and it may encourage investment from more buyer and tenant-oriented for the first time in decades. Lower Parel is witnessing noteworthy demand, given the fact that the rentals and capital values are less than half of those in the CBD and at Bandra Kurla Complex. It is mostly the corporates and business houses that seem to be taking maximum advantage from the current scenario in the commercial estate.

Bengaluru: Aditya Birla Real Estate Fund is in the process of closing two investments in projects of Chennai-based Barath Building Construction Pvt. Ltd, as the Rs.1,100 crore fund reaches its final leg of deployment, said a top fund executive who didn’t want to be named.
Once fully deployed, it plans to raise a new, second fund.

“We have entered into a 70:30 joint venture with the developer for the project, that will have around 700,000 sq. ft of residential development,” said the executive.
In another transaction, the fund is in the process of investing Rs.75 crore in a redevelopment project in Chennai, where an existing hotel would be demolished for residential development, on about two acres of land.

Unlike debt-like transactions employed by real estate funds these days, these would be pure equity investments.

Barath Building currently has around 2 million sq. ft of real estate development in the city and has completed 40 projects.
Ananth Vummidi, managing director of Barath Building, declined to comment on the transactions.

With the investments in Chennai, Aditya Birla Real Estate Fund completes about 12 deals. The investments have all been in residential projects in the top five property markets of Mumbai, the National Capital Region , Pune, Bangalore and Chennai.

“We plan to do another three investments or so before fully deploying the fund corpus. Once that is done, by the first quarter of next year we hope to raise a second fund,” the executive said. He didn’t give further details.

Before the Barath transactions, the fund had made a bulk purchase of apartments for Rs.90 crore in Mumbai-based Kohinoor Group’s Dadar mixed-use property, which has residential and office space components. The fund invested in the residential segment Altissimo, which is currently under construction.
A Kohinoor spokesperson declined to comment.

At a time when home sales are particularly low, a number of private equity (PE) funds are looking to buy apartments at steep discounts to market prices.
Indiareit Fund Advisors Pvt. Ltd, backed by the Ajay Piramal group, started buying residential apartments in bulk from developers earlier this year when they launched an apartment fund.

More recently, former Indiareit head Ramesh Jogani partnered Centrum Capital Ltd to deploy Rs.250 crore in buying apartments in bulk.
Over the last couple of years, PE funds have displayed a keen interest in the Chennai property market, as developers have gone on to raise capital to build and purchase land.

However, unlike Bengaluru, which has somewhat survived a nationwide real estate slowdown, Chennai has seen a slow sales phase.

“Developers in Chennai are facing the challenge of weak property-buying sentiment, but we hope that will improve soon,” said Sanjay Chugh, head of residential services (Chennai) at property advisory Jones Lang LaSalle India. The good thing, Chugh said, is that prices in Chennai have remained largely rational and have stabilized, and there is good infrastructure, which will connect the city centre with distant suburbs.

The prices of commercial properties continue to rise indefinitely in Mumbai and in spite of this upswing mode, developers find sales and can easily get returns of 15-20% over a certain period of time.

Being the financial capital of India, commercial property prices in Mumbai are at an all-time high and also rise with each passing financial year. This makes Mumbai one of the vital economic landscapes of India and Asia. Companies such as IT, banking, ITES, financial services insurance and other such service sectors drive the economy of Mumbai.

Investments made in commercial property in Mumbai offer a return of minimum 15-20% and this is not just restricted to the sales but extends to lease and rentals for office spaces as well. The latter sector has witnessed a rise of 25% in commercial prices over a span of few months only.

Commercial Hubs in Demand:
Mumbai’s Nariman Point is undoubtedly the most upscale and posh business district and is listed amongst one of the most expensive commercial rental space in the world. This sea-facing business district is also one of the most well-planned and first such business district in the country. The place is also in close proximity to Western and Central Line as well as the Harbour line railway terminus. The impressive skyline of this area has often drawn comparisons and named as the ‘Manhattan’ of Mumbai.

The extended central business district areas cover areas like Lower Parel, Prabhadevi, Worli, Mahalaxmi etc. Worli was primarily a textile mill location but has now transformed into one of the prime commercial destinations in the country. Having retained its premiere position, TATA, Siemens, GSK pharma are some of the well-known offices located here.

Bandra, Kurla, Kalina are places that have been categorised as the emerging destinations of commercial business. Also known as the Bandra-KurlaComplex, this are houses offices such as Citibank, NABARD, Dow Chemicals, DhirubhaiAmbani International School, SEBI, US Mumbai consulate etc.

Andheri East has also emerged as a popular and in-demand destination that has office spaces of Jet Airways, Abbott Healthcare Private Limited, Mastek Limited etc. It offers great connectivity which has contributed to it emerging as a commercial hub.

They will be higher in some pockets, but for those going for redevelopment, the new fee will be calculated for the extra space the owner gets in the new flat

Come 2015, and you will be paying almost 20 per cent more for the stamp duty and registration of your new flat in Mumbai. The new ready reckoner rates will be out on January 1, and as per sources in the Inspector General for Registration Office, Maharashtra, these are moving up by nearly 20 per cent across the city on an average, and will be higher in some pockets.

But there’s good news for those who already have flats and may go in for redevelopment. For alternative accommodation e.g. those going for redevelopment the fees shall be calculated for the extra space the owner gets, and not on the existing space he owns.

Vinod Sampat, president, Stamp Duty and Registration Payers’ Association, said that though the sales this year haven’t been that good, the prices are going high. “The ready reckoner rates will be nearly 20 per cent higher than what they were for the year 2014.

However, the alternative accommodation rates have been kept the same, thus benefiting homeowners in a building which will undergo redevelopment.” Sampat says the government should stop calculating the fees on built-up area and should start charging only on the carpet area.

On buying a property, the owner has to pay five per cent stamp duty and one per cent or Rs 30,000 (whichever is less) of the total flat value to the state government. This is mandatory for every sale and purchase of the property.

Dr Sanjay Chaturvedi, executive editor, Accommodation Times, also agreed that the ready reckoner rates are going up, but believes these rates are determined through a flawed technique. The ready reckoner rates are calculated for areas on the basis of the sale agreement registered in the registrar’s office.

The registrars observe the trend that is, if flats are going at higher prices, then the ready reckoner rates will go up or vice versa. “Why should the government charge these rates? Why not charge the buyer at the rate at which he or she has purchased the property? This whole process is irrational,” said Chaturvedi.

How the fee will be charged

If a person owns a 1,000 square feet flat, and after redevelopment he gets a 1,500 square feet flat, he will be charged the fee based on the construction cost for the existing 1,000 square feet, as per the old rates. On the additional 500 square feet he has received, the government will be charging him on the new ready reckoner rates.

You can use Residential Premises for Professional Purposes

Can a residential property by used for professional purposes or business office purposes ?

Ans. USER of Residential premises for professionals purposes :

Relevant Bye-Laws :Under Bye-Law No.78(d) of the model bye-laws of 1984 and Bye-law no.76(a) of the new model bye-laws of 1984 and Bye-law No. 76(a) of the new model bye-laws of 2001 no member of the Society should use the flat deemed to have been allotted to him for a purpose other than for the one for which it has been allotted.

Entire flat can be used for professionals and part of the flat can be used for business offices :In general a misconception is prevailing in the housing societies in Mumbai that a residential flat can be used only partly for professional office or is also misconceived that a residential flat cannot be used for business office at all. CRUZ of the judgements on user of residential flats is that even if the entire flat is used by a professional person for the practice of his profession, there is no change of user to a commercial one and there cannot be a prohibition for the same. If the flat is partly used for business office, then also if the dominant user is residential, there is no violation of the provisions relating to the change of user.

Distinction between business and profession :The constitution of India while ensuring under Article 19(1)(g) to all citizens the right to practice any trade, business or profession has maintained a clear distinction between carrying on a trade or business as against practicing a profession. The reason underlying the distinction is that unlike in a trade or business, a profession is practiced without any underlying profit motive. What a practicing professional renders to his client is his services essentially based on his qualification, personal skill and intellectual capacity.

All the learned professions have certain common characteristic like statutory recognition of the profession and adoption by the members a self contained code of conduct with statutory checks and boundaries to ensure professional integrity and character along with competence of the members of the profession so as to inspire confidence of the people in the profession.

The Supreme Court also has in several judgements maintained the above cited distinction between a trade and business on one hand and the practice of profession on the other hand.

The legality of user of premises is governed by the local laws applicable in various states in respect of Shops and Establishments Act, 1948.

Case law on firm of lawyers :In V.Sasidharan V/s Peter and Karunakar (1984) 65 FJR 374 (SC), the question for decision before the Supreme Court was whether the office of a lawyer or of a firm of lawyers is or is not a commercial establishment within the meaning of the Kerala Shops and Commercial Establishments Act (34 of 1960). The SC held that it does not require any strong argument to justify the conclusion that the office of a lawyer or a firm of lawyers is not a “shop” within the meaning of section 2(15).”

The Supreme Court has also, in several judgements reiterated this fundamental distinction. In National union of Commercial Employees V/s Industrial Tribunal (1962) 22 FJR 25, the Court held that a firm of solicitors was not an “industry” within the meaning of section 2(j) of the Industrial Disputes Act and that the services rendered by the firm were only in the individual capacity of the partners and very much dependent on their professional equipment knowledge and efficiency.

Case law on private dispensary :In yet another case of Dr. Devendra M. Surbi V/s. State of Gujarat (AIR 1969 SC 63 6T), the Supreme Court had occassion to examine the definition of “Commercial Establishment” in section 2(4) of the Bombay Shops and Establishments Act, 1948 and construing the word “Profession” appearing in association with the words “Business and Trade” in the said sub section, held that a private dispensary of a medical practitioner did not come within the definition of “Commercial Establishment”.

In Dev Brat Sharma V/s. Dr. Jagjit Mehta C.A. No. 4216 of 1988, the Supreme Court held that the user of residential premises under tenancy for the purpose of the doctor’s clinic did not tantamount to change of user.

West Bengal Govt. tried amendment of Shop and Establishments Act :The same conclusion was reached by the Calcutta High Court in Dilip Kumar V/s. Chief Inspector (Shops and Establishments) (1986) 69 FJR 100 (Cal). In this case, the question for consideration was whether the inclusion amounted to an unreasonable restriction violative of article 19(1)(g) of the Constitution.

Yoga Classes :In the case of Pant Nagar Anandlok CHS LTD. it was decided that carrying out activities like conducting yoga classes in a residential flat does not constitute breach of bye-laws of a Co-op. Housing Society.

The dispute in question had been field by the Pant Nagar Anandlok Co-op. Hsg. Soc. Ltd. against one of its members and his wife, seeking a declaration that the yoga activities of the member were violative of the bye-laws and were illegal. Further the society claimed in the dispute that this member herself or through her agents or servants be permanently restrained by an order or injunction from, in any manner conducting the yoga classes.

It was stated in the complaint that the society received complaints from its members that because of the yoga classes, there was a lot of harrassment to the neighbours, the members of the society and to the public at large. The society particularly referred to the fact that fashionable ladies and girls and hippy type persons visited the society’s premises, who spoke loudly that caused a lot of annoyance. The sandals, chappals and shoes in the passage cause obstruction for use thereof by the members of the society.The ailing persons, who could benefit from yoga were sometimes referred to her by doctors. On an average in a day, 30 to 40 persons used to attend the yoga classes which she taught between 7.30 am to 7.30 pm.

Drawing analogy from these verdicts, the Judge, in the case in question, decided that there was no breach of bye-laws or regulations of the society. The Court also directed the Respondent Society to pay Rs. 100/- as costs of the appeal to the appellant.

Office of Chartered Accountant :Phillipos & Co. Vs. The State of Karnataka C.C. No. 21496 of 1987 :Case under Karnataka Shops and Commercial Establishment Act, 1961 – office of the partnership firm of chartered accountants not a commercial establishment as C.As. carry on profession like lawyers or a doctor and do not carry on trade business.

Observations :“A reading of the provisions of the Chartered Accountants Act 1949 and the Regulations would make it amply clear that a chartered accountant in practice has manifold functions and duties to be observed by him and that apart for possessing required qualifications he requires special skill, learning and experience in the discharge of his duties.

A profession is a vocation or occupation requiring special usually advanced education and skill. The work and skill involved in a profession is predominantly mental or intellectual rather than physical or manual.”

Guidelines on the best steps that can help you to improve your credit standings before applying for a home loan

When you apply for a home loan, as part of process of evaluating your application, the lender that you apply to for a loan will access your credit report from an RBI licensed credit information company (also referred to as a credit bureau) that operates in India. Your credit report will have a credit summary of all the loans and credit cards you have taken and their repayment history in addition to your personal identification information as it has collected from the various lenders where you may have taken a card or a loan. It may also have a “credit score” which is a measure of “riskiness” of any credit extended to you.

Credit scores along with the credit report are an important parameter for many lending institutions when decisioning applicants. As a rule, the higher the score, the lower risk profile the individual which indicates a better ability to manage debt. As the lending system is becoming more cautious and is implementing high end analytics and rules to segregate good credit from bad, individuals with higher scores stand a better chance to negotiate interest rates and be granted credit.

Simply put, a score is a mathematical representation of the data on the credit report and hence a low credit score may be due to unpaid dues reflecting on the credit report.

However, lenders do not completely rely only on data from credit bureaus like scores or credit report but take a 360 degree view of the applicant’s financial situation, residence status, employment, etc.

This means that a high score may not necessarily assure the customer of a loan.

Here’s how you can help your credit score:-

1) Check your credit report and score in advance of applying for home loan
One must engage in routine credit checks every quarter by accessing credit information reports from credit bureaus. This acts as a yardstick to where one is placed prior to seeking loans. A routine check helps in keeping track of any issues that may be affecting the credit profile and score. If you have cancelled or closed a credit card in the past, double check your credit report for any pending dues from that credit card. If a discrepancy is noticed due to that credit card or any other loan, one must connect with the lenders to correct the report.

2) Limit your inquiries for loans or credit cards
Not all credit inquiries are bad, but it is true that most inquiries may impact individual scores and risk profile. When searching for new loans/credit cards, there is a greater chance of increased levels of debt burden, thereby increasing the possibility of a default in repayment. Shopping for loan/credit card should not be indulged in case one is not really interested in taking the loan/credit card.

3) Close any unused credit cards
It is recommended that one keeps track of all open credit cards and close unused credit cards. Unused cards are viewed as existing possible debt. Therefore, keep only credit cards that are used frequently and housekeep your cards regularly

4) Make timely bill payments
Make payments on credit card bills and loan installments as soon as possible, on or before due date. It helps to maintain a diary to reference all payment due dates. Any overdue payment will impact your credit report and credit score.

5) Don’t default on your bills
Needless to say, if you default on a credit card or a loan installment, it will show up on your credit report and negatively impact your credit report and score. The new lender that you are applying for home loan can see on your credit report all your previous defaults with other lenders. Even if you have settled with a bank on your defaulted payments, they are still reflected in credit reports.

6) Keep all contact details updated with your lenders
Ensure all contact details are updated with all lenders since if addresses and telephone numbers are not up to date may result in credit card statements and payment reminders from lenders not reaching you and hence may cause delays in payments too.

The prices in the residential real estate market are unlikely to come down as experts said that a large amount of global liquidity is chasing quality projects across the Asia Pacific region.

According to global audit firm PwC, there is an excess liquidity across the Asia Pacific region, which is chasing quality projects both residential and commercial projects in the region.

The rankings of leading cities in India like Mumbai, Delhi and Bengaluru have also improved significantly from that of last year in the list of top investment destinations for global investors following the election of a new government and also on account of an upturn in consumer demand.

The increased access to capital, according to experts will provide the much needed strength to real estate developers in tier I cities to hold on to their stocks for a much longer period, which is expected to keep the realty prices firmer in the coming months.

“The Indian realty market has once again turned favourable for global investors looking to invest in realty projects. This means that real estate developers in Tier I cities will have increased access to global funds. This may give them the capacity to hold on to their existing inventory which should keep the property prices firm in Tier I cities,” said Bhairav Dalal, associate director, PwC.

■ Mumbai attracted the highest investment of $1 billion, or T6,200 crore, among the country's key investment destinations in the January-September period of 2014. This was more than 20% of the total investment seen by the domestic realty market.■ The financial capital tipped Delhi and Bengaluru to gain this position, with Delhi being the second-most sought-after location, followed by Bengaluru.■ Of the amounts invested in Mumbai, land and development stage transactions made up nearly 70% and over 60% of total realty investments, respectively. In case of Bengaluru, over 50% of investments were attracted by the commercial office segment.■ Among key transactions, Kotak Realty Fund invested T300 crore in Nirmal Lifestyle's US Open residential project in Mumbai and Blackstone invested T175 crore in Ozone Group's project in Chennai.

The Mumbai realty market is hotting up with the city regaining the confidence of institutional investors.

Mumbai attracted the highest investment of $1 billion, or Rs 6,200 crore, among the country's key investment destinations in the January-September period of 2014. This was more than 20% of the total investment seen by the domestic realty market.

According to findings by global property consultant CBRE in its latest report "APAC Capital Markets MarketView Q3 2014", institutional investments and capital market transactions in the domestic realty market stood at nearly $4.5 billion, or close to Rs 27,900 crore, in the first nine months of 2014.

The financial capital of the country tipped Delhi and Bangalore to gain this position, with Delhi being the second-most sought-after investment location followed by Bangalore.

Of the amounts invested in Mumbai, land and development stage transactions made up nearly 70% and over 60% of total realty investments, respectively. In case of Bangalore, more than 50% of total investments during the period were attracted by the commercial office segment.

Of the Rs 27,900 crore invested in Indian realty, land and development stage transactions attracted nearly 60% (Rs 16,740 crore), which came in from domestic as well as foreign entities. The CBRE report said this was an indicator that a significant amount was being invested in green-field and brownfield developments.

In office developments, Blackstone, Standard Chartered and Embassy India together invested Rs 1,150 crore in Vrindavan Tech Village in Bengaluru. The GIC has also announced the formation of a joint venture with Bengaluru - based Brigade Enterprises to invest around $250 million in residential and mixed-use development in cities across southern India.

Commercial office segment, on the other hand, has started to see signs of revival in investor sentiment. This space attracted 20% of total investments, or roughly Rs 5,600 crore, in the Indian realty market in the January-September 2014 period. Commercial office segment has been the worst hit in the last two years as leasing activity slowed down and companies refrained from committing bigger of spaces amidst a slowing economy.

In the July-September period of last year, absorption of overall office space declined almost 15% year-on-year in the top six cities of India. However, in July-September 2014, absorption picked up and was up a sharp 31 % at 8 million square feet.

Anshuman Magazine, chairman and managing director, CBRE South Asia, said: "Office space transactions, in fact, increased about 20% year-on-year in the first nine months, with more large-scale space leases and higher lease volumes on an aver-age over the previous year across leading cities in India. The period saw significant investor interest in completed and well-leased core commercial office assets and IT parks across key cities."

According to Cushman and Wakefield's November report, a number of sovereign and pension funds are committing funds to Indian real estate. These include the All Pensions Group (APG Group), Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA), Canada Pension Plan Investment Board (CPPIB), State General Reserve Fund of Oman (SGRF) and GIC of Singapore. Piramal Fund Managers (IndiaREIT), Xander Advisors, Kotak Realty Fund, JP Morgan, ASK Advisors, etc have raised funds recently, the consultant noted.

Sanjay Dutt, executive managing director (South Asia), Cushman & Wakefield, said: "Clarity in the governance process and the advent of a stable government at the Centre will be critical to the stability of the investment market. Added to this, the recent announcements strengthening real estate will further the cause of the sector."

According to market estimates, Indian real estate-focused private equity (PE) funds are expected to raise around $1 billion from overseas by March 2015.

THE COMPLETION of several large transactions including a couple of deals worth over $500 million each — pushed up the total real estate investment volume in the Asia Pacific region in the June–September period to $35 billion, a quarter-on-quarter increase of about 40 per cent (as per the CBRE APAC Capital Mar-kets MarketView 03 2014 report). By the latest estimate of Oxford Economics, the year-on-year economic growth of Asia Pacific in 2014 at approximately 4.4 per cent, slightly up from its June forecast of 4.3 per cent. The 2014 real estate in-vestment forecast for India, meanwhile, also indicates an improvement due to government's stimulus efforts.

INSTITUTIONAL INVESTMENTS IN INDIA'S REAL ESTATE SECTOR

INSTITUTIONAL INVESTMENTS and capital mar-ket transactions in the India realty market during the first nine months of the year stood at approximately $4.5 billion. Out of this, land and development stage transactions attracted the highest quantum of investments (nearly 60 per cent) from domestic as well as foreign entities during the period, indicating perhaps a significant amount of investment in Greenfield and Brown¬field development. The commercial office segment, meanwhile, attracted more than 20 per cent of this total investment amount during the period in question.

In terms of investment locations, Mumbai's realty market attracted the highest investment, followed by Delhi and Bangalore. In terms of total real estate investments made in Mumbai and Delhi during the period, land and development stage transactions spelt nearly 70 per cent and more than 60 per cent of total realty investments in the cities, respectively. In the case of Bangalore, more than 50 per cent of total investments during the period were attracted by the commercial office segment.

Office space transactions, in fact, increased by about 20 per cent year-on-year in the first nine months, with more large-scale space leases and higher lease volumes on an average over the previous year across leading cities in India. The period saw significant investor interest in completed and well-leased core commercial office assets and IT parks across key cities. Investment highlights during the first nine months of 2014 also included GIC announcing the formation of a joint venture with Bangalore-based development firm, Brigade Enterprises, where the two firms plan to invest approximately $250 million in residential and mixed-use development in cities across southern India.

GOVERNMENT STIMULUS SPURS CAPITAL MARKETS IN INDIA

WHILE INVESTOR INTEREST in India and South-east Asia steadily increased over the first nine months of the year, this interest is yet to translate into an increase in investment turnover. India, accorded a sizeable uptick in business confidence following the coming of a new government earlier in the year. The new govemment is expected to implement policies to attract foreign direct investment (FDI) and develop the Real Estate Investment Trust (REIT) market. FDI alone savv a dramatic 34 per cent y-o-y increase in India during Q1 2014-15 as multi-national firms reacted positively to the new government's reform agenda. On the regulatory front, India's realty sector saw two major developments — the Securities and Exchange Board of India's (Sebi's) notification of final guidelines on the setting up of FtEIT and Infrastructure Investment Trusts (InvITs), and the revision in FDI norms for the construction sector.

FUNDING AVENUES

THE LENDING ENVIRONMENT remained mixed in the geography during the first nine months of the year, with India having to address challenges such as inflationary pressures (which has sit. begun to ease off gradually). Capital markets in India saw the growth of non-banking lending activity as property firms continued to find it difficult to obtain project financing from commercial banks.

At a time when the country's realty sector has been struggling for alternate avenues of funding—other than traditional banks and financial institutions—private players have been sourcing institutional capital. At such a juncture, permitting REIT and InvIT is expected to act as a key enabler for capital markets in the country, and provide investors with exit options.

The outlook for capital markets in India's realty sector continues to look positive and trans¬action activity is expected to improve further in forthcoming quarters. September 2014 saw global credit rating agency, Standard and Poor, raising the outlook for India from 'negative' to 'stable', with the rationale that the country's new government mandate and improved political situation offered a more positive environment for much-needed reforms.

- by Anshuman Magazine for The Indian Express
(The author is CMD, CBRE SouthAsia)

Aimed at attracting foreign investment into the realty sector, government on Wednesday relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms.

The revised norms relating to Construction Development Sector, which were earlier approved by the Cabinet, have been notified the Department of Industrial Policy and Promotion (DIPP). India allows 100 per cent FDI in the sector through automatic route.

In view of depleting FDI inflow in construction and real estate sector in last couple of years, the government has reduced the minimum floor area to 20,000 sq mt from the earlier 50,000 sq mt. It also brought down the minimum capital requirement to$ 5 million from $10 million.

In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed, said the Consolidated FDI Policy Circular 2014.

Although 100 per cent foreign direct investment was allowed in townships, housing and built-up infrastructure and construction developments since 2005, the government had imposed certain conditions.

The government expects the new measures would result in enhanced inflows into the construction development sector.

The sector is also likely to attract investments in new areas and encourage development of plots for serviced housing given the shortage of land in and around urban agglomerations as well as the high cost of land.

The measures are also likely to result in creation of much needed low cost affordable housing in the country and development of smart cities. The new policy has also done away with the 2-year lock-in period for repatriation of investment.

"The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage," the circular said.

Earlier the government had said the relaxation was necessary as FDI inflows in the sector, which witnessed a steady rise during 2006-07 and 2009-10, have started declining.

Between April 2000 and August 2014, the construction sector received FDI worth $ 23.75 billion or 10 per cent of the total FDI attracted by India during the period. The revised policy is in line with the Budget 2014-15 announcement.

To boost the development of affordable homes, government has exempted the conditions of minimum floor area as well as capital requirement if an investee/joint venture companies commit at least 30 per cent of the total project cost for low-cost housing.

The circular further said the commencement of the project will be the date of approval of the building plan/lay out plan by the relevant statutory authority. Subsequent tranches of FDI can be brought till the period of ten years from the commencement of the project or before the completion of the project, whichever expires earlier.

It also said the government may permit repatriation of FDI or transfer of stake by one non-resident investor to another non-resident investor, before the completion of project. These proposals will be considered by FIPB on case to case basis.

Further, the project should conform to the applicable norms and standards, including land use requirements and provision of community amenities and common facilities. The government has also clearly defined 'developed plots', 'Floor area' and 'real estate business' to remove any kind of ambiguities.

The circular also clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs).

Also, 100 per cent FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres.

The Government has also halved the minimum capital requirement for such projects

from $10 million to $5 million for joint ventures with Indian partners.

Minimum built-up area reduced to 20,000 sq meters

The Government has formally notified a reduction in the minimum area and minimum capitalisation requirement for foreign investors in construction to attract more funds into the cash-starved sector.

Foreign investors can exit projects on its completion or on development of trunk infrastructure such as water supply, drainage, roads and street lighting, according to a Press Note released by the Department of Industrial Policy and Promotion (DIPP) on Wednesday.

The Press Note is based on the decision taken by the Cabinet for FDI in construction development in October this year.

The minimum built-up area requirement for FDI in construction projects has been reduced to 20,000 square meters from 50,000 sq.m.

For services plots, the minimum area requirement, earlier at 10 hectares, has been dropped completely.

Minimum capital requirement has also been halved to $5 million from $10 million.

For encouraging investments in affordable homes, the Centre has exempted the conditions of minimum floor area as well as capital requirement if an investee/joint venture company commits at least 30 per cent of the total project cost for low-cost housing.

Have you always believed in real estate as a solid form of investment?

I think that every Indian actor and sportsman will tell you that real estate is the best form of investment. It takes care of itself. Even if you take yesteryear actors, the ones who are financially strong till date are ones who invested in property.

Yes, I always had interest in real estate and invested in it.

What made you decide on weekend home project?

I love the outdoors. I spent all my holidays in my hometown of Mulki near Mangalore. Full of coconut trees and backwaters, it was a nature lover’s paradise. So, when S2 got into real estate, we wanted to develop properties that were havens for a nature lovers. Discovery has 3.5 acres of open land, which gives enough space for kids to play around.

Real estate is a very hands-on business. How familiar are you with its nuances?

Well, I have always had a love for architecture. While working in my dad’s restaurant, I would always think about the of space, ventilation and sanitation and how I could improve it for the staff. Later, when I joined films, the sets blew me away. My wife, Mana comes from a family of architects. Sujata Hegde, my sister, handles the business aspect of it.

Tell us a bit about the project…

Discovery is a gated community of 21 villas each set on a plot size of 8,000 to 10,500 sq ft.

The architect for the project is Alan Abraham while Mana, who owns a store in Worli, Mumbai called R House has furnished and styled the villas. We have created a water body ( lake) in the project with floating amenities and have planted around 400 trees. It has play areas, gazebos, pergolas, gym, barbecue lounges and bars across the project. Further on, we want to build a dog park, which will have kennels, swimming pool and a play area for them with a vet on call.

People who have pets can leave them here while they are travelling. S2 Realty has received many awards, a few of which are ‘ The Excellence in Design’ at MCHI CREDAI, we came in the ‘ Top Ten Homes of 2014’ and in the ‘ Top Five’ of World Architecture News. We are really proud of these laurels.

These much-needed-and-delayed projects will transform the way Mumbaikars travel

Chief minister Devendra Fadnavis on Thursday gave his nod to commence paperwork,

including inviting tenders and having financial tie-ups, for three crucial projects of Mumbai.

Which are the projects?
The projects — Dahisar-Charkop-Bandra-Mankhurd (DCBM) metro line, Wadala-Ghatkopar-Thane (Teen Haath Naka)-Kasarvadavali (WGTK) metro route, and flyovers on Kalanagar junction — have been at the planning stage for years now. On Thursday, DNA had reported about how Fadnavis, who is also the chairman of MMRDA, will have to take a call on these projects that will transform the way citizens travel.

What do the metro projects involve?
The much-needed-and-delayed DCBM corridor will be 40km-long having 36 underground stations. It will be implemented at an estimated cost of Rs25,605 crore. WGTK metro will have six elevated stations on Ghodbundar Road, the remaining will be 24 underground stations along the overall 32km-long route. Estimated cost of this project is Rs19,097 crore.

Who will fund them?
“Both corridors will be implemented by the Mumbai Metro Rail Corporation within six to seven years. These metro lines will be funded by raising loan to the tune of 50% of the cost from international finance agencies, while central government and state government are likely to provide 20% and 30%, respectively, by way of equity and sub debt,” said Dilip Kawathkar, spokesperson for MMRDA.

Why are flyovers needed at Kalanagar Jn?
At an estimated cost of Rs227 crore, a maze of flyovers and a road will be built at Kalanagar Junction in Bandra (East). “The aim is to clear the daily rush-hour traffic chaos in Bandra-Kurla Complex. A survey conducted has revealed that every hour an average of over 12,000 cars crowd the junction. This problem will be solved by constructing four flyovers and a road,” added Kawathkar.

Which areas will they connect?
There will be a flyover each to reach the Sea Link from BKC and the other way around. The total length of these two two-lane flyovers will be 1,888 metres. The flyover connecting Dharavi to Western Express Highway (WEH) will join the flyover from BKC at the second level and there will be a three-lane flyover connecting the one reaching WEH. This flyover will be 2,920m-long.

It is a good entry point into an expensive property but you do need to ask a few tough questions

A prospective property buyer was given an option by a builder - Rs 15,000 a sqft if 20 per cent was paid upfront and 80 per cent on possession or Rs 14,000 a sqft if 20 per cent was paid upfront and the other 80 per cent was linked to pace of construction.

The builder promised to deliver the project in three years. The question: Which is better for the buyer?

Kartik Jhaveri, director, Transcend India, a financial advisory company, has a simple answer. "For someone investing in this property, the first one is better. For the end-user, the second." Why? An investor who does not want to stay in the property is mostly interested in capital gains. So, he might not want to lock too much money at the start of the project. And, even if the project is delayed, an investor can afford to wait because he is not really looking to stay in it. However, if this property is being bought by an end-user, the second offer is better, as the bank will disburse payments based on meeting the construction goals. In addition, the financial institution will ensure the due-diligence and documentation is in place.

Real estate consultants say another important question to ask is whether you would be able to sell the property without any charges. "It is important to know this because depending on the builder, the cost of transfer can be one to five per cent. In properties which are expensive, this can be a significant sum," says one. For investors who want to make a quick buck, this can be an important question because the returns will be adversely impacted.

If the buyer expires before the possession, what would be the status of the property? "Despite the Maharashtra Ownership Flat Act specifying that if a buyer pays 20 per cent, the builder needs to get into an agreement, many builders do not want to get into an agreement if the initial payment is only 20 per cent. These issues can cause problems in the future," says Jhaveri.

The spate of such schemes comes on the back of a lackadaisical festival season. According to a recent report by UBS Securities, pre-sales of top developers have gone down 50 per cent year-on-year in 2014, pushing residential inventory to a seven-year high. No wonder, innovative schemes such as 20:80 and 25:75 are making a comeback.

In the past, developers had introduced this aggressively but the Reserve Bank of India stepped in. Earlier, the scheme was heavily loaded in favour of the builder. The developer, bank and home buyer went into a tripartite agreement. The buyer paid 20 per cent of the full value of the house upfront. The remaining 80 per cent was given to the developer by the bank. The developer would pay interest to the bank on this amount till it handed over possession to the buyer. The home owner would start paying the equated monthly instalment (EMI) once the property was delivered.

This scheme had dual implications. One, the builder received cheaper funding at interest rates meant for home buyers, a clear four to six per cent lower than what the builder would normally get from banks. Said a senior official at a housing finance company: "With home loan rates at 10.15 to 11 per cent, loans to builders come at 16-17 per cent or even more, if the builder is new. So, this was a perfect way for builders to get money at extremely cheap rates."

This scheme was very popular, especially in Mumbai and Delhi. So much so that Deepak Parekh, chairman of Housing Development Finance Corporation said in its 2012-13 annual general report: "Borrowers must not be blinkered into believing that there are no risks when developers offer to pay interest on a borrower's loan for a specified period. Borrowers have to be cautious because in the event of a developer delaying payment, the credit bureau reports will reflect this in the borrower's records, thereby impacting his or her creditworthiness."

In September 2013, former RBI governor D Subbarao red-flagged 20:80 schemes, a few days before his retirement. "Such housing loan products are likely to expose the banks, as well as their home loan borrowers, to additional risks in case of disputes between individual borrowers and developers/builders, default/delayed payment of interest/EMI by the developer/builder during the agreed period on behalf of the borrower, non-completion of the project on time, etc," said the RBI note.

It also warned banks that any delayed payments by developers or builders on behalf of individual borrowers to banks might lead to lower credit ratings or scores of such borrowers at credit information companies (CICs), as information about servicing of loans gets regularly passed on to CICs. "In cases where bank loans are also disbursed upfront on behalf of their individual borrowers in a lump-sum to builders/developers without any linkage to stages of construction, banks run disproportionately higher exposures, with concomitant risks of diversion of funds," added the note.

In its new avatar, the dice is not so heavily loaded in favour of the builder. The new schemes give an option as mentioned at the outset. Now, there is no tripartite agreement. Instead, only developer and buyer are involved and decide on the method of payment. It is important that buyers or investors take note of all these points before taking a plunge.- by Joydeep Ghosh for Business Standard